What does Cost Performance Index (CPI) measure?

Cost Performance Index (CPI) is an essential metric used in project management to measure the cost efficiency of the resources utilized in a project relative to the budgeted cost. It is calculated by dividing the earned value (EV) by the actual cost (AC). A CPI value greater than 1 indicates that the project is performing well in terms of cost and is under budget, while a CPI less than 1 suggests that the project is over budget and may face financial challenges.

Understanding CPI is crucial for project managers as it allows them to assess and control costs effectively, make data-driven decisions, and implement corrective actions to keep the project on track financially. This focus on cost efficiency directly impacts the overall success of the project and the satisfaction of stakeholders.

The other options do not accurately represent what CPI measures. Schedule efficiency relates to how well a project adheres to its timeline, which is typically assessed by different metrics such as the Schedule Performance Index (SPI). Project risk assessment involves evaluating the potential risks that may impact project objectives, which CPI does not specifically address. Lastly, while quality of project outputs is critical, it is evaluated concerning quality assurance metrics rather than CPI, which strictly focuses on cost efficiency.